S&P 500 retreats with Nasdaq heading for worst week since 2012
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London: US stocks fell and the Nasdaq Composite Index headed for the biggest weekly drop since 2012 after chipmakers reported sales that trailed estimates.
Intel Corp., Microsoft Corp. and Cisco Systems Inc. fell more than 2.5% to lead losses in the Dow Jones Industrial Average. Microchip Technology Inc. tumbled 11% as weaker demand from China hurt revenue. Juniper Networks Inc. sank 7.7% after reporting preliminary results that missed its own forecast.
The Standard & Poor’s 500 Index lost 0.3% to 1,922.18 as of 2:46 pm in New York. The Nasdaq slid 1.3%. The gauge has dropped four of the past five days and is down 3.2% for the week. The Dow average was little changed.
“Clients are anxious for sure, given the growth slowdown chatter that seems to be growing,” said Manish Singh, who helps manage $2 billion at Crossbridge Capital in London. “The move in the market lacks conviction. We’re telling clients to stay put.”
Trading volume among S&P 500 companies was 67% higher than the 30-day average at this time of day, according to data compiled by Bloomberg.
Microchip Technology sank 11% to $40.57 after reporting preliminary quarterly sales that trailed forecasts. The company makes semiconductors used in products ranging from home appliances to computer network hardware to cars, making its earnings a broad indicator of demand across the industry.
“We believe that another industry correction has begun, and that this correction will be seen more broadly across the industry in the near future,” Steve Sanghi, Microchip’s chief executive officer, said in a statement.
Juniper Networks dropped 7.7% to $19.33. Revenue is projected to be $1.11 billion to $1.12 billion, less than Juniper’s own estimate of $1.15 billion to $1.2 billion, the company said.
More than $1 trillion has been erased from the value of US equities in the three weeks since 19 September, on concerns a stalling economy in Europe and slowing growth in China will hurt profits at US corporations.
“It’s healthy to have corrections along the way because it does reduce valuations, it does shake out people that don’t have fundamental convictions,” Jim McDonald, chief investment strategist at Chicago-based Northern Trust Corp., said by phone. His firm manages about $924 billion. “A long overdue correction can help the bull market have a longer duration.”
The International Monetary Fund (IMF) cut its forecast for global growth this week and said the euro area faces the risk of a recession. European Central Bank (ECB) president Mario Draghi pledged at the IMF’s annual meeting to loosen monetary policy more if needed. That contrasted with German finance minister Wolfgang Schaeuble, who warned against US-style quantitative easing and urged continued budgetary discipline.
Federal Reserve policy makers said in minutes of their last meeting that slowing global growth and the stronger greenback posed potential risks to the US outlook.
Investors are also watching earnings reports after Alcoa Inc. unofficially kicked off the results season this week. JPMorgan Chase & Co., Citigroup Inc., BlackRock Inc. and Google Inc. are among S&P 500 members posting results next week. Profit for companies in the index probably rose 4.8% and sales gained 4.2% in the third quarter, analysts projected.
“A correction is just healthy,” said Carsten Hilck, who helps oversee $4 billion as a senior fund manager at Union Investment Privatfonds GmbH in Frankfurt. “You can’t go up all the time. It’s nothing to worry about too much.” Bloomberg
Sofia Horta e Costa in London also contributed to this story.